SecZim to audit fungible shares trading amid 'cheating' reports

Published: 12 March 2020

The Securities and Exchange Commission of Zimbabwe says it will undertake an audit of all transaction inflows on dual listed shares that were consummated with effect from June 1, 2019. This comes amid reports that some cheating could have occurred, which includes backdating share certificates in order to get past the 90-day vesting period.

Government imposed a vesting period of 90 days on dual-listed fungible shares last year in July, motivated by allegations that speculators were using the Old Mutual Implied Rate to manipulate the exchange rate. However in spite of the vesting period, the Old Mutual share has remained popular as an exit point based on the premise that it is easier to exit using the OMIR than dispose and get paid at the interbank rate.

But now allegations have surfaced that one of the transfer secretaries was involved in a syndicate with some stockbrokers where shares were backdated for a fee. These are however still allegations and SECZIM, in a directive issued today, said that it will immediately undertake an audit of all transaction inflows which were executed from June 1, last year.

All suspicious transactions will be flagged and dealt with in terms of the relevant laws in particular the Money Laundering and Proceeds of Crime Act and the Securities and Exchange Act, according to SECZIM chief executive Tafadzwa Chinamo in the directive.

"We request that every documentation required to comply with Exchange Control Directive (RU102/2019) should be in place on all the transactions from the mentioned period."

The directive follows communication sent by Zimbabwe Stock Exchange chief executive Justin Bgoni , which was warning market participants that failure to comply with the Exchange Control Directive or risk either a suspension or a cancellation of trading licences.

SECZIM called on market intermediaries to prescribe additional KYC and Enhanced Due Diligence requirements on the handling of fungible shares from external registers.

According to the directive, CDD information should include basic KYC information on clients, information on beneficial ownership and declaration and proof of source of funds/net worth.

If the information is not disclosed, registration of shares into the local register should not be facilitated and a suspicious transaction report should be filed with relevant authorities. "All rejected transfer requests must be reported to ZSE and SECZIM simultaneously." - finx